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Fed cuts rates by 50 basis points

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Intuitive Machines ( LUNR ) soars after clinching NASA contract

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Indexes up: Dow 0.25%, S&P 500 0.40%, Nasdaq 0.75%

(Updated at 2:47 p.m. ET/1647 GMT)

By Chuck Mikolajczak

NEW YORK, Sept 18 (Reuters) -

U.S. stocks briefly shot higher on Wednesday after the

Federal Reserve cut interest rates by 50 basis points, the high

side of estimates for its first cut in more than four years.

Citing a "greater confidence" that inflation is moving

toward the central bank's 2% target, the

Fed cut rates

by half of a percentage point, as it now focuses on keeping

the labor market healthy.

Trading was choppy. Prior to the announcement, the S&P

500 oscillated between modest gains and losses. The benchmark

rose as much as 1% after the announcement before paring gains.

"The Fed ended the pause with a bang. It's a strong

signal that they cut by 50 bps and expect another 50 basis

points of cuts this year," said Brian Jacobsen, chief economist

at Annex Wealth Management in Menomonee Falls, Wisconsin.

"The Fed is projecting that by front loading the cuts

they can stick the landing with the unemployment rate at 4.4%

and inflation dropping to target quickly."

Market expectations for the size of the rate cut had

been volatile in recent days, pricing in about a 65% chance for

a 25 basis point cut last week to a 57% chance for the larger 50

basis point cut earlier on Wednesday, according to CME's

FedWatch Tool.

The Dow Jones Industrial Average rose 103.40

points, or 0.25%, to 41,709.58, the S&P 500 gained 22.31

points, or 0.40%, to 5,656.89 and the Nasdaq Composite

gained 132.71 points, or 0.75%, to 17,760.77.

Borrowing costs had been parked at their highest levels in

over two decades since July 2023, when the central bank last

hiked interest rates by 25 basis points to between 5.25% and

5.50% to combat inflation.

After the rate cut announcement, Fed Chair

Jerome Powell said

the central bank's forecast for the path of interest rates

did not imply the need for urgent action.

Markets are now fully pricing in a cut of at least 25

basis points at the Fed's November, meeting with a roughly 40%

chance for another 50 basis point cut.

Small cap stocks, seen as more likely to benefit from a

lower interest rate environment, moved higher, with the Russell

2000 up about 2%. Regioanl banks, some of which had been

stressed by higher interest rates, also gained ground, with the

KBW Regional bank index up 2.35%.

Markets have rallied this year, with all three major indexes

setting record highs on prospects of lower interest rates as

inflation moderated and the jobs market showed gradual signs of

cooling.

Intuitive Machines ( LUNR ) surged 44% after clinching a

$4.8 billion navigation services contract from NASA.

Advancing issues outnumbered decliners by a 2.65-to-1

ratio on the NYSE and by a 2.25-to-1 ratio on the Nasdaq

The S&P 500 posted 42 new 52-week highs and no new lows

while the Nasdaq Composite recorded 159 new highs and 49 new

lows.